4 ms·

No, what banks do is take most of the money you deposited and make high risk investments with it. Then when the unthinkable happens, and that 0.001% chance tha

by blunte 5y ago

No, what banks do is take most of the money you deposited and make high risk investments with it. Then when the unthinkable happens, and that 0.001% chance that their models said could happen happens, they turn to the government (which means taxes and debt for you) to bail them out. Neither scenario is good.

woodruffw 5y ago
Banks are required to maintain capital reserves (distinct from the federal reserve rate) sufficient to weather most financial upsets. And the fact that the federal reserve moves to compensate customers in the (extremely rare) case of bank insolvency is an incredibly good thing, probably among the single greatest stabilizing factor in consumer banking in the US.
- danielmarkbruce 5y ago
  It's not actually the fed who does it. It's the FDIC, which is a different entity. The FDIC's money comes from... banks. Technically the FDIC is backed by the US Government and has a credit line with the US Treasury, but they seem to get along fine with the money they collect from banks.
  - woodruffw 5y ago
    I had always thought that the FDIC was a division of the Fed! Thanks for the correction.
- latchkey 5y ago
  Bailed out by the FDIC... https://www.valuewalk.com/2020/02/top-10-biggest-bank-failures/ https://www.valuewalk.com/2020/02/top-10-biggest-bank-failur...
  - woodruffw 5y ago
    Yes, that's what they're supposed to do. Each of the individual bailouts in that list tells a pretty interesting story: in each case, the FDIC only had to pay out a small fraction of the bank's total assets, indicating that the reserve system functioned as intended. WaMu, the biggest on the list, didn't require a single cent from the FDIC fund! But again, it would be okay if it did, because that's what it's there for.
narrator 5y ago
Or, if you're in China the government just prints a bunch of electronic money, gives it to the banks to recapitalize them, and shoots any bankers who didn't follow proper lending guidelines.
danielmarkbruce 5y ago
The last time the US government got involved in bank bailouts (TARP), the government made a profit of something like $15 bill or so...
spywaregorilla 5y ago
Yeah, at least the stablecoins are putting the money into safe things like Chinese commercial paper
astrange 5y ago
If the bank loses your money in a bad transfer it can simply be reversed, which is the largest difference from crypto where you can easily send it nowhere.
- notch656a 5y ago
  Wish that were the case. When my CC was stolen I immediately reported the fraud to the bank (it was under 24 hours after the theft/skimming that I noticed the charge). The fraudster replied to the bank with a fake invoice showing my name, address, payment, and a UPS tracking number which went to my city (UPS will not tell 3rd parties what actual address a tracking number goes to, so they refused to tell the bank it wasn't actually to me). The e-mail address they said I used? It was something like Arrrrrrrrr343434@yahoo.com -- Literally they were taunting that they were a pirate. I imagined this process with bogus invoices from a fraudster would only delay things long enough for the fraudster to cash out, but that I would eventually be refunded, but oh how I was wrong. I went through the formal process of reversing the charge, and was laughed at over the phone, and made to feel like I was defrauding the bank. The bank was openly hostile to me for suggesting someone had committed fraud with my account. (The item in question? Some religious dolls and expensive perfumes. I am an atheist man with no use for either.) They even had a formal panel where like a dozen people examined the facts. I got a letter from the bank telling me to go fuck myself and that my claims were false. I appealed and they sent me another letter to go fuck myself. Not long after that, the bank rebilled me for the money, closed my checking account, and then showed me another letter from e-Bay where some officer there meticulously, over something like 10 pages, documented that _I_ was the fraud and the fraudster was the real. This has never happened to me with crypto, because a fraudster can't intercept my private key just by intercepting a transaction. My personal experience with banks is if you're a victim of fraud you'll get a lot of judgement from the bank, they may or may not accuse you yourself of fraud, and in the end they do anything to avoid reverting the charge. If you're lucky they'll just send you a letter telling you to fuck yourself and if you aren't lucky they may refer you to the police to be charged.
  - encryptluks2 5y ago
    Hopefully you sued your bank cause that is one benefit of banks is that in the event of a loss it is also much easier to sue those involved than someone difficult to find.

by blunte 5y ago

woodruffw 5y ago

Banks are required to maintain capital reserves (distinct from the federal reserve rate) sufficient to weather most financial upsets. And the fact that the federal reserve moves to compensate customers in the (extremely rare) case of bank insolvency is an incredibly good thing, probably among the single greatest stabilizing factor in consumer banking in the US.

danielmarkbruce 5y ago
It's not actually the fed who does it. It's the FDIC, which is a different entity. The FDIC's money comes from... banks. Technically the FDIC is backed by the US Government and has a credit line with the US Treasury, but they seem to get along fine with the money they collect from banks.
- woodruffw 5y ago
  I had always thought that the FDIC was a division of the Fed! Thanks for the correction.
latchkey 5y ago
Bailed out by the FDIC... https://www.valuewalk.com/2020/02/top-10-biggest-bank-failures/ https://www.valuewalk.com/2020/02/top-10-biggest-bank-failur...
- woodruffw 5y ago
  Yes, that's what they're supposed to do. Each of the individual bailouts in that list tells a pretty interesting story: in each case, the FDIC only had to pay out a small fraction of the bank's total assets, indicating that the reserve system functioned as intended. WaMu, the biggest on the list, didn't require a single cent from the FDIC fund! But again, it would be okay if it did, because that's what it's there for.

narrator 5y ago

Or, if you're in China the government just prints a bunch of electronic money, gives it to the banks to recapitalize them, and shoots any bankers who didn't follow proper lending guidelines.

danielmarkbruce 5y ago

The last time the US government got involved in bank bailouts (TARP), the government made a profit of something like $15 bill or so...

spywaregorilla 5y ago

Yeah, at least the stablecoins are putting the money into safe things like Chinese commercial paper

astrange 5y ago

If the bank loses your money in a bad transfer it can simply be reversed, which is the largest difference from crypto where you can easily send it nowhere.

notch656a 5y ago
Wish that were the case. When my CC was stolen I immediately reported the fraud to the bank (it was under 24 hours after the theft/skimming that I noticed the charge). The fraudster replied to the bank with a fake invoice showing my name, address, payment, and a UPS tracking number which went to my city (UPS will not tell 3rd parties what actual address a tracking number goes to, so they refused to tell the bank it wasn't actually to me). The e-mail address they said I used? It was something like Arrrrrrrrr343434@yahoo.com -- Literally they were taunting that they were a pirate. I imagined this process with bogus invoices from a fraudster would only delay things long enough for the fraudster to cash out, but that I would eventually be refunded, but oh how I was wrong. I went through the formal process of reversing the charge, and was laughed at over the phone, and made to feel like I was defrauding the bank. The bank was openly hostile to me for suggesting someone had committed fraud with my account. (The item in question? Some religious dolls and expensive perfumes. I am an atheist man with no use for either.) They even had a formal panel where like a dozen people examined the facts. I got a letter from the bank telling me to go fuck myself and that my claims were false. I appealed and they sent me another letter to go fuck myself. Not long after that, the bank rebilled me for the money, closed my checking account, and then showed me another letter from e-Bay where some officer there meticulously, over something like 10 pages, documented that _I_ was the fraud and the fraudster was the real. This has never happened to me with crypto, because a fraudster can't intercept my private key just by intercepting a transaction. My personal experience with banks is if you're a victim of fraud you'll get a lot of judgement from the bank, they may or may not accuse you yourself of fraud, and in the end they do anything to avoid reverting the charge. If you're lucky they'll just send you a letter telling you to fuck yourself and if you aren't lucky they may refer you to the police to be charged.
- encryptluks2 5y ago
  Hopefully you sued your bank cause that is one benefit of banks is that in the event of a loss it is also much easier to sue those involved than someone difficult to find.